Capitol Updates

Friday, August 23, 2024 
  
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Special Session Concludes with Property Tax Relief, K-12 School Funding Spared for Now

The 2024 Nebraska Special Legislative Session concluded on Tuesday, August 20, 2024, with significant developments that have implications for our state, particularly in the areas of property tax relief and budget cuts. We want to provide you with a clear understanding of the outcomes, especially concerning K-12 public schools. 

Legislation Recap: The Nebraska Legislature passed LB34 with a vote of 40-3, introducing $185 million in new property tax relief. This bill includes a provision to automatically apply existing income tax credits for property taxes paid directly to annual property tax statements, eliminating the need for taxpayers to request them. The legislation also caps municipal and county government revenue growth to the rate of inflation or 0% in times of deflation, with exceptions for public safety, emergencies, and voter-approved measures. 

To fund the property tax relief, the Legislature approved LB2 and LB3. LB2 passed with a vote of 33-11, implementing $117 million in budget cuts, while LB3 passed 36-9, allowing for $22 million in cash fund transfers and increased fees. Additional funding will come from state reserves. Governor Jim Pillen signed all three measures into law on Tuesday afternoon, with the new laws taking effect on Wednesday, August 21, 2024. 

Key Takeaways: 

• K-12 Public Schools: Governor Jim Pillen's initial Special Session proposal, which included severe lids on local schools, and which NSEA opposed, did not pass. The legislation that was passed does not directly impact K-12 public school funding. The early proposals, including LB1 and LB9, which would have affected local school boards’ ability to fund school needs, were not included in the final package. This is a relief for our public schools and the students they serve. 

• Property Tax Relief: The Legislature passed LB34, which provides $185 million in new property tax relief. This bill incorporates a key idea from Sen. Jen Day's LB12, which "front-loads" existing income tax credits for property taxes paid, making the credits automatically appear on Nebraskans’ property tax statements rather than requiring taxpayers to request those credits. This change is expected to be popular among taxpayers and will likely benefit Sen. Day as she seeks re-election this November. 

• Budget Cuts: Unfortunately, the change to the property tax credit program comes at a significant cost. To fund LB34, the Legislature passed LB2 and LB3, which collectively implement $117 million in budget cuts, including a $25 million reduction in the state's Health and Human Services Budget. These cuts will severely impact vital state services that many Nebraskans rely on, and the ripple effects may be felt across various sectors, including health care and social services. 

• Municipal and County Government Revenue Caps: LB34 also includes provisions that cap municipal and county governments' ability to collect more in property taxes than the greater of the inflation rate or 0% in times of deflation, compared to the previous year. Exceptions are made for public safety services, emergencies, and voter-approved measures. 

• Defeated Proposed Sales Tax Increases: It is important to note that the final legislation did not include the Governor’s proposals to add new sales taxes on goods or services, as well as the increased "sin" taxes that were initially proposed by Governor Pillen and lawmakers earlier this summer. 

• Front-Loading Property Tax Credits: The bill includes a provision to “front-load” LB1107 income tax credits for property taxes paid, ensuring these credits appear first on annual property tax statements. This change aims to increase utilization, as approximately 50% of eligible credits had previously gone unclaimed. 

• Expansion of School Tax Credits: The bill allocates $750 million in school tax credits for the next fiscal year, with plans for growth in future years. This is a significant investment in Nebraska’s educational infrastructure. 

• Restrictions on Property Tax Increases: The bill restricts annual increases in property tax-asking authority by municipal and county governments to the state and local inflation index, or 0% in times of deflation. Exceptions include public safety services, the work of county attorneys and public defenders, voter-approved measures, and emergencies. 

• Funding the New Plan: To finance this revised plan, senators advanced two appropriation bills, LB2 and LB3, later in the week. These bills include about $139 million in budget cuts and increased fees. If adopted on Saturday during Final Reading, the state would still need to cover an additional $46 million from state reserves. 

In the final days of the special session, lawmakers also debated Legislative Resolution 2CA, a constitutional amendment proposed by State Senator Tom Brandt of Plymouth. However, the proposal was blocked due to a failure to invoke cloture and end debate during the Select File stage. This amendment would have granted the Legislature greater flexibility in valuing owner-occupied residential properties. Had it advanced and been approved by voters, the amendment would have allowed these properties to be taxed at a lower percentage, similar to agricultural land, while maintaining a higher tax rate for non-owner-occupied and other commercial real estate. 

What’s Next: While we are relieved that K-12 public school funding remains intact for now, we must remain vigilant as the long-term effects of the adopted state budget cuts become clearer. We are deeply concerned that proposals discussed during the special session are likely to be introduced by lawmakers in January 2025 during the regular 90-day legislative session. Of particular concern are bills that would put further hard revenue caps on K-12 public schools, would have the state take over 100% of the funding for local public schools leading to total state control of our local public schools, as well as making local school teachers and staff state employees. 

If such proposals come to fruition, these changes could significantly impact the quality of education in our communities, and it is crucial that we take a stand now. The upcoming November 5 General Election provides a critical opportunity to elect pro-public education candidates to the Legislature. Your participation in this election is vital — please make sure to register and vote to protect our schools, the future of children in Nebraska, and our local communities. 

The NSEA and its Government Relations Team will continue to advocate for the needs of our students, teachers, and communities, ensuring that education remains a top priority in the state. Your dedication to education is invaluable, and staying informed on these critical issues is more important than ever. Thank you for your commitment to the future of our students and for taking an active role in shaping the policies that affect them. 

Review of Special Session Education Related Bills

Approved by Governor

LB2 (Clements) Provide, change, and eliminate appropriations for operations of state government 
NSEA Position: Opposed 

LB3 (Clements) Provide, change, and eliminate provisions relating to funds and fees
NSEA Position: Neutral 

LB34 (Brewer) Change the method of assessment of real property 
NSEA Position: Support – contains provisions of LB12 

Select File 

LR2CA (Brandt) Provide a different method of taxing owner-occupied housing 
NSEA Position: Oppose 

In Committee

LB1 (Linehan) Adopt Property Tax Growth Limitation Act, School District Property Tax Relief Act 
NSEA Position: Oppose 

LB9 (Hughes) Change provisions under Tax Equity and Educational Opportunities Support Act 
NSEA Position: Neutral 

LB12 (Day) Adopt the School District Property Tax Relief Act 
NSEA Position: Support 

LB16 (Erdman) Adopt the Nebraska EPIC Option Consumption Tax Act 
NSEA Position: Oppose 

LB33 (Brandt) Change provisions relating to tax credits for school district taxes paid 
NSEA Position: Support 

LB37 (Kauth) Change provisions relating to property that is exempt from property taxes 
NSEA Position: Oppose 

LB38 (Kauth) Change provisions relating to property that is exempt from property taxes 
NSEA Position: Oppose 

LB42 (Murman) Provide duty for the Education Committee related to TEEOSA 
NSEA Position: Oppose 

LB43 (Murman) State findings related to school funding 
NSEA Position: Oppose 

LB45 (Linehan) Change provisions relating to local system formula resources under TEEOSA 
NSEA Position: Oppose 

LB61 (Wayne) Require school district cover costs for transfers due to discrimination 
NSEA Position: Monitor 

LB64 (Wayne) State legislative intent on tax credits, local sales taxes, and property tax relief 
NSEA Position: Monitor 

LB69 (Conrad) Rename Property Tax Credit Act and Property Tax Credit Cash Fund 
NSEA Position: Monitor 

LB72 (McDonnell) Change valuation of residential real property for property tax purposes 
NSEA Position: Monitor 

LB76 (McDonnell) Adopt the Employee Contributions Tax Incentive Act 
NSEA Position: Support 

LB80 (Raybould) Adopt Property Tax Growth Limitation Act, terminate Property Tax Request Act 
NSEA Position: Monitor 

LB81 (Halloran) Provide a termination date for TEEOSA 
NSEA Position: Oppose 

LR1CA (Blood) Require Legislature to reimburse political subdivisions as prescribed 
NSEA Position: Support 

LR5CA (Erdman) Prohibit governmental entities from imposing taxes except retail consumption 
NSEA Position: Oppose 

LR6CA (Kauth) Impose a limit on ad valorem taxes for real property 
NSEA Position: Oppose 

LR24CA (McDonnell) Provide a different method of taxing residential real property 
NSEA Position: Monitor